The Court of Appeals for the Fifth Circuit recently ruled on the Tax Court’s valuation of a hotel with a conservation easement gifted by a partnership to a nonprofit corporation involved in historic preservation and a gross valuation misstatement penalty. It affirmed the valuation based on local comparable sales where the reproduction cost approach was inappropriate because the building would not be reproduced if destroyed and the income approach was prone to error and based on unverifiable assumptions. It reversed the Tax Court’s decision to uphold the penalty because the partnership presented a good faith defense by showing evidence of obtaining two appraisals and relying on advice of tax attorneys and accountants.